IMHO: “Fifth” Avenues

That year  marked my twentieth wedding anniversary, it was the year my father passed away, the year my eldest went off to college for the first time, and also the year that “catch-up contributions” became an item of more-than-passing interest to me.

In recent weeks, I’ve had occasion to think back on those past five years, and all that has transpired – the Pension Protection Act, QDIAs. the back-and-forth on fiduciary advisers, the first wave (and subsequent flurry) of revenue-sharing lawsuits, the growing emphasis on transparency and disclosure, the growth – and questions about – target-date funds, the “normalization” of a fiduciary role for retirement plan advisers, and more recently, the back-and-forth on an expanded fiduciary definition.  Like many of you, I can still recall the tumultuous news of September 2008 – all hitting during our PLANADVISER National Conference that year.

While it’s fun and interesting to look back at what’s gone on the past several years – to imagine what might have been, and perhaps to rue what has, it’s clear that we’ve all come a long way over the past five years – and little question that we have an interesting road ahead as well.     

Here are five things I think we can count on for the next five years:

Participant fee disclosure won’t matter.

Let’s face it; most participants don’t do anything with their retirement accounts.  Most never realign balances, most don’t ever change the amount they defer, and – thankfully, most leave those accounts alone at times when we’re all worried that they will not.  I’m betting, for all the angst about participant fee disclosures, most won’t read them – and even fewer will do anything in response.  With luck, by the time they get those disclosures, they won’t feel the need.

Plan sponsor fee disclosure will matter.

It’s no easy thing for a plan sponsor to up and change providers.  All other things being equal, most would rather crawl over hot coals than deal with all the additional work (and decisions) attendant with those changes.  That said, once fee disclosures become more public, and, shall we say, “systematic” – well, I expect plan sponsors will have a lot of “help” reviewing the information.  While I don’t expect a massive surge in provider changes, I think it’s fair to say that a lot of “haggling” will take place. 

Advisers that work with ERISA plans will need to be ERISA fiduciaries.

Arguably it’s already tough to win a piece of ERISA business against an adviser willing to claim fiduciary status.  But I think we’ve already passed the tipping point, and if market forces weren’t sufficiently persuasive, the regulators now seem determined to press the issue.

We’ll come to regret our complacency about target-date fund designs.

In the aftermath of the 2008 financial crisis, much was made of the variations in target-date glide paths, the disparity in assumptions that resulted in wildly different results for those just a couple of years away from retirement.  Since then, the markets have repaired much of that damage, but little appears to have been done in terms of rethinking the assumptions and structures of those funds.  More troubling is how little movement has since been apparent among plans that felt burned, but ostensibly were ignorant (willfully or otherwise) of those differences in 2008.

Retirement income will (still) be the big thing we all say needs to be solved that (still) isn’t.

Mark Twain once famously remarked that “everyone talks about the weather, but nobody does anything about it.”  Well, you can’t say that people haven’t been doing things about retirement income.  In fact, there have been some pretty remarkable developments over the past couple of years.  The Obama Administration has certainly tried to jumpstart the discussion, if not adoption of such designs.  A truly comprehensive safe harbor could be a game-changer here – but I’m guessing that there won’t be a target-date “simple” solution here.  Not that there should be …